Vancouver will spend $900,000 on a plan to lure venture capital funds to the city in hopes of encouraging investment in local start-up companies.

The allocation, which had not been previously disclosed, came at the end of a fractious city council debate over whether politicians had been given enough information about the need for the program and how it would be funded.

Several council members, confused over whether the city itself planned to invest in the fund, wanted the concept deferred until the Vancouver Economic Commission, which will run the program, puts together more details in coming weeks. The VEC’s report contained no budget but was a high-level look at how the city could benefit from encouraging venture funds to move here.

But in an effort to build support for the plan, Mayor Gregor Robertson at the last minute suggested a budget of “no more” than the $900,000, to be spent over the next three years. He sought to allay concerns that the money could find its way into a venture fund itself, saying it is meant only for marketing and advertising.

The city by law can’t invest in such a fund and the VEC program is intended to simply encourage venture-capital funds that could finance young tech companies to relocate to Vancouver, he said.

Those assurances meant little to Non-Partisan Association councillors Elizabeth Ball and George Affleck, who complained the city was pushing ahead with a vague plan without many of the details required of other city initiatives.

The VEC proposed the idea as a result of discussions with the mayor’s office after it was told there aren’t many venture capital funds in the city that can swing large financing deals for rising start-ups.

Ian McKay, the VEC’s executive director, said seed companies can find money to get going but once they prove out their plan they are often forced to go elsewhere for more significant loans. As a result Metro Vancouver is constantly building and then losing job-generating companies to places like California, he said.

McKay said Vancouver’s start-up ecosystem is ranked ninth in the world behind places like the Silicon Valley, Toronto, London, Tel Aviv and Seattle in a 2012 survey by Startup Genome and Telefonica Digital. While some financiers know of Vancouver’s relative strength as a start-up capital, it doesn’t rank high enough in their minds.

Convincing some venture capitalists to move to Vancouver will result in the region keeping more of those small success stories, he said.

Matt Toner, the owner of Zero 2 Heroes, an incubator company, said it may also help to free up some of the resource money still in Vancouver. He spoke to council as a member of the public.

“We do have money here in Vancouver. We have resource money, we have old money. It isn’t very well catalyzed and it is possible that if you bring in these new funds, these new investors, and they are creating success stories, they will trigger the effect that the money that is here becomes more active,” he said.

Toner said while the city ranks high in some things, such as talent, mindset and support, it ranks at the bottom in terms of government support and access to capital. The city needs to be the champion for young innovative companies like HootSuite, the locally-developed and successful social media company.

“We need to be in the business of mass-producing the Hootsuites of the world,” Toner said. “Having venture capital firms put offices here will cause them to want to put money into local projects.”

The city plan has also won the cautious approval of Vancouver’s 22 business improvement areas, who were named in the commission’s report but were not consulted. Wes Regan, speaking for the BIAs, said the commission also needs to support local “bricks and mortar” businesses, even if they are not tech-oriented.

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Vancouver council approves $900,000 plan to lure capital funds

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